Car industry will die without subsidies: Macfarlane

Industry Minister Ian Macfarlane during his visit to the Toyota factory in Tokyo on Wednesday ... he had “pretty frank’’ discussions with the company, which explained to him the cost pressures on its Australian operations and its plans to target wages and conditions.
AFR

by
Phillip Coorey | Simon Evans

Industry Minister
Ian Macfarlane
has issued a blunt warning to his colleagues who want to cut subsidies to car makers that the industry will disappear without ongoing assistance.

With the Holden issue dividing the federal cabinet and feeding into the South Australian election, scheduled for March, Prime Minister
Tony Abbott
declined to state a position other than saying he wanted the industry to succeed and jobs preserved, and the solution was lower taxes, less regulation and increased productivity.

Mr Macfarlane spoke to The Australian Financial Review a day after what he described were “pretty frank’’ discussions with Toyota in Japan in which the company explained to him the cost pressures on its Australian operations and its plans to target wages and conditions.

Mr Macfarlane is facing internal resistance from Treasurer
Joe Hockey
and other economic dries about giving Holden a “blank cheque’’ to stay in Adelaide beyond 2015.

Mr Macfarlane said regardless of economic philosophy, the cabinet faced a stark choice.

“Either you do or you don’t. If you don’t subsidise the industry, it won’t be there," he said. “I accept that argument, I’m not sure that my colleagues do yet.’’

Every vehicle in the world is subsidised

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Mr Macfarlane echoed the views of Labor’s industry spokesman
Kim Carr
, saying every vehicle in the world was subsidised, either directly or in kind, be it through tariffs, currency manipulation or other means.

He said he wanted the Productivity Commission, which is reviewing car industry assistance for the government, to highlight this and contrast the level of assistance Australian car makers receive compared with their foreign counterparts.

“All countries subsidise. Most subsidise much more than we do," he said.

Mr Macfarlane insisted local manufacturers do more in return to boost competitiveness and exports or they would be “not long for this world’.’

Holden is awaiting an answer from the Coalition on assistance for beyond 2015. It had struck a deal with the previous Labor government to stay until 2022 and develop and manufacture two new cars in Adelaide.

The Coalition will not make a commitment until the Productivity Commission report on the industry is finished next year.

Senator Carr reiterated that this would be too late, saying the General Motors board is expected to make a decision on Holden in December.

Assistant Infrastructure Minister Jamie Briggs, a South Australian, said the government could not simply give Holden a “blank cheque".

South Australian poll on March 15

“What guarantee is there that they wouldn’t be back in 12 months’ time yet again,’’ he said.

South Australians go to the polls on March 15 and a furious Labor Premier
Jay Weatherill
emphasised that any departure by Holden would be the sole fault of the Abbott government.

On Wednesday, Mr Hockey attempted to blame Labor, saying the situation had developed under its watch. One senior car industry source, who did not want to be identified, described Mr Hockey’s claim as “complete bullshit’’, noting Holden had made a deal with federal Labor to stay.

With experts predicting a Holden shutdown would cost the state 13,000 direct and indirect jobs and cause Toyota and other component manufacturers in Victoria to collapse, Mr Weatherill launched a campaign called “More Than Cars’’.

“There are some people who think this is just about one little car manufacturing plant out there in Elizabeth. It’s about much more than that,’’ he said.

He said the federal government was “utterly reckless’’ for delaying decisions and shifting what he said was an agreed time frame by waiting until the Productivity Commission report is finalised.

Former Liberal finance minister and South Australian senator Nick Minchin urged Mr Abbott to protect the industry. He agreed with Mr Macfarlane, Senator Carr and Mr Weatherill that all cars globally were subsidised somehow and in Australia assistance was “relatively small".

“I think Australia gets tremendous bang for its buck from its investment in the car industry,’’ he said.